What departures mean for Aegis

17 July 2008

Mainardo de Nardis’ shock departure in May, swiftly on the heels of David Verklin’s, could be the result of persistent pressure applied to the Aegis board by Vincent Bolloré. Pip Brooking explores the possibilities

Vincent Bolloré may have failed once again to secure seats on the board of Aegis Media, following a fifth shareholder defeat at the Group’s Annual General Meeting on 23 May, but is the pressure responsible for fissures among Aegis bosses?

The departure of Mainardo de Nardis as chief executive at the beginning of the month surprised everyone. Since his arrival two years ago, Aegis Media has established itself as a force to be reckoned with on the pitch circuit. De Nardis’ personal involvement has meant plenty of credit has fallen at his feet.

The Group’s financial results too have been rosy. For Q1, Aegis Media posted organic growth of 10.3% and revenue growth of 19.4%. Shares rose 4.5% at the news, and they have risen more than 10% in the last six months – in contrast to other operating groups feeling the effects of the economy.

Responding to questions about de Nardis’ departure, Aegis Group CEO Robert Lerwill said: “Mainardo did a good job... but business moves on; management moves on.”

He emphasised the achievements incoming Aegis Media chief Jerry Buhlmann has made over the last four years as head of EMEA: “Jerrry has done an outstanding job in all respects of managing 70% of the profits of Aegis Media.” Buhlmann will be a strong leader and, in truth, many could have expected his appointment instead of de Nardis’ two years ago.

But if the rumours are true, boardroom politics played a key part in de Nardis’ exit. It has been suggested he was behind the departure of David Verklin, CEO of Aegis Americas, as part of a restructure of the region two weeks earlier. Lerwill denied the two were connected, but it would be enough cause to prompt rumbles of dissent.

Potentially the more immediate factor could be directly related to Bolloré and how Aegis should be run as a business. With persistent attempts to get representation on the board and holding 29.85% of the Group’s shares, Bolloré’s presence is being felt by Aegis. Good financial results will keep Aegis’ shareholders happy. But Bolloré would only need one of the other major shareholders - Goldman Sachs, Fidelity International, Legal and General or Barclays – to wobble, and he would effectively seize control of the Group. The loss of two key executives, however planned Verklin’s departure was, would have to be handled carefully in such a situation.

But beyond that it has been suggested there had been a disagreement over what extent Aegis should court Bolloré. Lerwill called this “spurious tittle-tattle”. But the Group’s growth could indicate the company is being run for the short-term, and, as the last remaining independent media network, an acquisition has been on the cards for the last three years.

Lerwill was quick to point out that Aegis had never received an official bid, and is not seeking one.

A Deustche Bank analysis of the situation, pre-AGM, still argued that a combination of Aegis and Havas had little benefit for Aegis, “unless it is affected through a formal offer”.

Lerwill argued that they would keep on fighting the proposed board nominations. Although one shareholder stood up at the AGM and asked “how can we stop this farce?”, it remained against the company’s interest to accept them, he said.

The Deutsche Bank briefing added that Bolloré has not affected operating performance nor undermined the shares. It argued a fifth shareholder rejection would send out a signal that “attempting creeping control remains a futile initiative... and would increase pressure on Bolloré to table a formal offer to secure control of Aegis”.

But how sustainable is the current stalemate? Aegis does not rule out accepting a formal bid from Bolloré, and with each attempt on board presence, the pressure on Aegis’ independence increases.

Pip Brooking